MasterCard is a leading global payment solutions company that provides a variety
of services in support of the credit, debit and related payment programs of
over 25,000 financial institutions that are our customers. Through our three-tiered
business model as franchisor, processor and advisor, we develop and market payment
solutions, process payment transactions, and provide consulting and information
services to our customers and merchants. We manage a family of well-known, widely
accepted payment card brands, including MasterCard® , MasterCard Electronic™,
Maestro® and Cirrus®, which we license to our customers.
As part of managing these brands, we also establish and enforce rules and standards
surrounding the use of our payment card system. We generate revenues from the
fees that we charge our customers for providing transaction processing and other
payment-related services (operations fees) and by assessing our customers based
primarily on the dollar volume of activity on the cards that carry our brands
(assessments).
A typical transaction processed over our system involves four parties in addition
to us: the cardholder, the merchant, the issuer (the cardholder’s bank)
and the acquirer (the merchant’s bank). Consequently, the payment system
we operate is often referred to as a “four-party” payment system.
Our customers are the financial institutions that act as issuers and acquirers.
Using our transaction processing services, issuers and acquirers facilitate
payment transactions between cardholders and merchants throughout the world,
providing merchants with an efficient and secure means of receiving payment,
and consumers and businesses with a convenient, quick and secure payment method
that is accepted worldwide. We guarantee the settlement of many of these transactions
among our customer financial institutions to ensure the integrity of our payment
system. In addition, we undertake a variety of marketing activities designed
to maintain and enhance the value of our brands. However, cardholder and merchant
relationships are managed principally by our customers. Accordingly, we do not
issue cards, extend credit to cardholders, determine the interest rates (if
applicable) or other fees charged to cardholders by issuers, or establish the
merchant discount charged by acquirers in connection with the acceptance of
cards that carry our brands.
We believe the trend within the global payments industry from paper-based forms
of payment, such as cash and checks, toward electronic forms of payment, such
as cards, creates significant opportunities for the continued growth of our
business. Our strategy is to continue to grow by further penetrating our existing
customer base and by expanding our role in targeted geographies and higher-growth
segments of the global payments industry (such as premium/affluent and contactless
cards, commercial payments, and debit), enhancing our merchant relationships,
seeking to maintain unsurpassed acceptance and continuing to invest in our brands.
We also intend to pursue incremental payment processing opportunities throughout
the world. We are committed to providing our customers with coordinated services
through integrated, dedicated account teams in a manner that allows us to capitalize
on our expertise in payment programs, marketing, product development, technology,
processing and consulting and information services for these customers. By investing
in strong customer relationships over the long-term, we believe that we can
increase our volume of business with customers over time, and in support of
this strategy, we continue to ensure our resources are appropriately aligned
with our corporate strategy and we continue to develop additional sales and
other support personnel.
Competition
MasterCard programs compete against all forms of payment, including paper-based
transactions (principally cash and checks), electronic transactions such as
wire transfers and Automated Clearing House payments and other electronic forms
of payment, including card-based payment systems. As a result of a global trend,
electronic forms of payment such as payment cards are increasingly displacing
paper forms of payment, and card brands such as MasterCard, Visa, American Express
and Discover are benefiting from this displacement. However, cash and checks
still capture the largest overall percentage of worldwide payment volume.
